Getting a high valuation on your property may seem like a great thing. But in certain cases, an inflated valuation can actually cause more headaches than it’s worth. Here’s a counterintuitive look at why higher property appraisals aren’t always the blessing they seem.
Higher Valuation = Higher Taxes
For homeowners, a higher valuation from the county assessor often translates into higher property taxes. Some people even intentionally try to lower their home value to reduce their tax outgo. You end up paying more money for an asset that hasn’t necessarily increased your actual equity.
Difficulty Getting Loans
When seeking a mortgage, an overstated property value can sabotage your chances. Lenders typically want the appraisal to match the sale price. If the appraisal is much higher than your offer, they may think you are borrowing more than what the property is worth.
This gap between appraisal and offer price is a red flag for lenders. It complicates the underwriting process and loan approval. Bringing down an inflated appraisal adds frustrating delays.
Repairs and Renovations
An unjustifiably high valuation can create unrealistic expectations for renovation costs. If the appraisal seems detached from the property’s condition, you may end up overspending on repairs. The valuation may promise a certain return on investment that never materialises.
Harder to Contest
Contesting an overstated valuation becomes tricky. The local tax authorities assume you should be happy to pay taxes on a higher value. And sellers will also resist attempts to bring down the appraised value.
But sometimes a grossly inflated appraisal harms more than helps. Don’t hesitate to contest it if the facts support a lower valuation.
Not the True Market Value
The ultimate risk is that the high appraisal does not reflect the true current market value. Just because a valuation report states a certain figure doesn’t mean it is an accurate representation of what buyers will pay.
Rely more on actual comparable sales rather than theoretical valuations. Don’t get swayed by an ambitious appraisal if real-world sales data indicates otherwise.
Key Takeaways
- Higher valuations increase property taxes, make loans tougher
- Overstated values can lead to unrealistic renovation costs
- Harder to contest an inflated appraisal even if inaccurate
- Look at comparable sales for true market value, not just appraisals
While it’s satisfying to get a high valuation, be wary if it seems artificially inflated. Make sure the appraisal aligns with real market activity. Don’t hesitate to contest red flags. In real estate, higher numbers aren’t always better.
